More than £1bn was wiped off Cable and Wireless's value yesterday after the telecoms company dismayed investors with costly plans to overhaul the business.

The move will see 3,500 jobs cut as C&W abandons domestic business markets in the US and mainland Europe to focus on multinational customers.

The review covers the company's global division, which provides Internet and data services to corporate customers and has been rocked by pricing pressures in the last 18 months.

C&W currently employs 12,500 people.

The UK business, covering sites in London, Birmingham, Warrington, Bracknell and Milton Keynes, should be largely unaffected by the restructuring.

But the cost of the overhaul - estimated by the company to be £800m over the next 12 months - horrified the London market.

C&W's shares, which were worth £14 at the height of the tech boom, slumped by 36 per cent to just 83p - their lowest level since the mid-1980s.

And that meant C&W's market value was slashed to £1.98bn by the end of the session compared to £3.1bn a day ago.